Hopeful return to the fold

[crates]

After long period as a permie I've taken the decision to get back to contracting. This time I'll be using a brolly as I fully expect to be IR35 caught.

I have SIPP which contains all my pension assets accumulated over the years which I manage myself. Ideally I would like to have contributions made into this by my 'employer', rather than signing up for their own bucket-shop stakeholder job. The question I'd like to ask is... is it ok/legal for a brolly to do this ?

I know I could simply take the maximum salary and make personal contributions into my SIPP, but that's after EE/ER NICS have been deducted and the SIPP provider can only reclaim the TAX. As I understand it, if my emploer paid directly into the SIPP, there would only be a liability for NICs on the balance which is then paid in salary.

Can anyone confirm this and better still, suggest any brollies that are happy to do so. I have already approached a number and have been told they won't do it... although a couple have said it's not a problem.

If anyone else is doing this, which brolly are you using.

[LisaContractorUmbrella]

Has the umbrella company that agreed to make the contribution said whether or not you would get tax relief on the contribution?

[crates]

Has the umbrella company that agreed to make the contribution said whether or not you would get tax relief on the contribution?

Most have refused stating that I must sign up to their stakeholder pension, which I don't want to do. Two have said they can do it but one of those seems confused (hence why I've dismissed them too).

The final one has given me an illustration which shows the contribution to the SIPP will be paid out of the contract earnings (gross). Then they take out expenses claimed. They then calculate the ER-NICS which leaves abalnce as salary, on which I am taxed and NI'd to death)

So yes, they are taking the SIPP out of the gross which was what I hoped would happen. The alternative of paying my SIPP contribution personally (i.e. out of NET income) would mean that my SIPP provider could reclaim the tax, howver I will have paid ER/EE NICS on the contribution which I could not recover.

Is that correct ?

[LisaContractorUmbrella]

Most have refused stating that I must sign up to their stakeholder pension, which I don't want to do. Two have said they can do it but one of those seems confused (hence why I've dismissed them too).

The final one has given me an illustration which shows the contribution to the SIPP will be paid out of the contract earnings (gross). Then they take out expenses claimed. They then calculate the ER-NICS which leaves abalnce as salary, on which I am taxed and NI'd to death)

So yes, they are taking the SIPP out of the gross which was what I hoped would happen. The alternative of paying my SIPP contribution personally (i.e. out of NET income) would mean that my SIPP provider could reclaim the tax, howver I will have paid ER/EE NICS on the contribution which I could not recover.

Is that correct ?

IANAIFA but I don't believe that the umbrella company should be able to give tax relief on a personal contribution which is why most have refused (as we would have done) and referred you to their own employer schemes

[TheFaQQer]

Why not just go Ltd?

[crates]

IANAIFA but I don't believe that the umbrella company should be able to give tax relief on a personal contribution which is why most have refused (as we would have done) and referred you to their own employer schemes

Maybe I'm not explaining this very well.

Almost all companies offer their employees a pension, into which the company pays a contribution. The employee is not taxed or NIC'd on this contribution. Agreed ?

If I decline the company pension and make a PERSONAL contribution instead, it would come out of taxed AND NIC'd nett earnings, the SIPP provider reclaims the tax BUT CANNOT RECLAIM THE NIC I HAVE PAID. This is why I don't want to make personal contributions myself from nett income.

Most brollies are saying I must join their own scheme, into which they pay a contribution nett of tax and NIC. If they can do this, why not into my SIPP instead.

My point is that as the employer pays into the pension/SIPP it is paid before tax, and more significantly 2 lots of NIC, are levied. Making a personal payment from nett, results in a higher NIC payment being made which cannot be recovered by the SIPP provider.

Does that make sense ?

[LisaContractorUmbrella]

Maybe I'm not explaining this very well.

Almost all companies offer their employees a pension, into which the company pays a contribution. The employee is not taxed or NIC'd on this contribution. Agreed ?

If I decline the company pension and make a PERSONAL contribution instead, it would come out of taxed AND NIC'd nett earnings, the SIPP provider reclaims the tax BUT CANNOT RECLAIM THE NIC I HAVE PAID. This is why I don't want to make personal contributions myself from nett income.

Most brollies are saying I must join their own scheme, into which they pay a contribution nett of tax and NIC. If they can do this, why not into my SIPP instead.

My point is that as the employer pays into the pension/SIPP it is paid before tax, and more significantly 2 lots of NIC, are levied. Making a personal payment from nett, results in a higher NIC payment being made which cannot be recovered by the SIPP provider.

Does that make sense ?

It does make sense yes and you can't do it - if you want to make a personal contribution it must be made from your net earnings

[crates]

How is my employer making a payment into a SIPP any different from making the same payment into a stakeholder ?

How is that a personal contribution ?

By joining the 'company' plan instead, I am forced with having to transfer the company pension into my SIPP at a later date.

Arguably, it makes sense to change brollies regularly in order to be able to leave their scheme to affect a transfer.

What a load of bullocks.

I'll call HMRC and see what they have to say.

[TheFaQQer]

I'll call HMRC and see what they have to say.

Why bother - if your employer says no, then that's the end of it.

[crates]

Why bother - if your employer says no, then that's the end of it.

Huh ? I don't have an employer yet. This is one of the questions I've been firing at brollies. Some are happy to pay into my SIPP from gross, others are not.

I shall use a brolly that is prepared to do it, but check it's OK with HMRC first.

This thread relates to SIPP contribs made by a contractors Ltd, but the same rules should appy to brollies. If they don't someone please explain why
http://forums.contractoruk.com/accou...d-company.html